Bangalore Emerges As Safety Property in India

During the year 2011 when almost all other matured property market witnessed dip in transaction and price correction was on everyone’s lip, Bangalore registered both healthy transaction as well as upward price movement. While the home loan interest rate hikes are dampening the property market in other parts of the country, sales are steady in Bangalore because there has been substantial wage inflation too. Bangalore typically has first home-buyers in the 27-35 years of age. “Younger home-buyers are willing to take the rate hike,” says Archana S. Bhargava, Executive Director, Canara Bank. Some property analysts believe Bangalore is possibly the safest location for investments in the world. Prices do not skyrocket or get hyped here and they do not go downwards too like they have in many other prominent locations in India. This is because Bangalore is a market where most of the property purchases are by end users and not speculators. Speculators treat it as a pure investment for financial gains. A leading real estate company conducted a study on the pattern of first purchases (purchase straight from developer) by end-users. The study found a surprising and comforting factor that 81.2 percent of first purchases in Bangalore were by end-users and not speculators or investors who look for just financial returns. This figure in locations such as Mumbai could be as low as 40 percent. The advantage of end-users buying more is prices do not appreciate or depreciate at abnormal percentage across the city. This is comforting factor for a homebuyer since the prices would be stable and would move upwards or downwards within a small band. Even during the recession, the salability in Bangalore property was quite visible. Also, the market here is not driven by economic sentiment in some other parts of world but by the actual demand and supply situation in the particular location where the project is located. Bangalore real estate has, of late, seen a spate of transactions where high net worth investors (HNIs) have scooped up fixed rental income assets. Traditional business families from Kolkata and Uttar Pradesh, who in the past financed developers in cities like Chennai, have moved their capital in Bangalore in recent years. A Kolkata-based investor has acquired 2.17 lakh sft of commercial space from Leading Property Developments for Rs 141 core. The office space at Leading Paragon in Bangalore’s IT suburb Brookefieldsis occupied by tech giant Intel. The Silicon Valley of India is also witness to more and more land being dedicated to the establishment of tech parks and commercial real estate Grade-A office space. According to global workplace solutions provider Vestian CEO (Asia Pacific) Shrinivas Rao, “In the last five years, around 50 million sq ft of commercial real estate Grade-A office space has been absorbed, out of which more than 75 per cent has been taken by IT/ITeS.” It has also seen an escalation in office space for rent in Bangalore during Q2’11 (April-May-Jun-2011) over Q2’10, according to the real estate portal 99acres.com. The rate of appreciation differs in each micro market but most localities have witnessed double digit growth. “The commercial office space for rent in Bangalore are more affordable compared to those in NCR and Mumbai. Tenants here are more stable and pedigreed, given the dominance of the IT industry. And these are huge positives for HNI investors,” says Anuj Nautiyal, Executive Director, Redwoods Capital, a real estate brokerage and asset management firm.